Currency swaps - part 2

In this lesson

1. 0:00 Currency swaps introduction
2. 1:00 Assessing swap gains and comparative advantage
3. 2:50 Splitting gains and bank fees
4. 3:27 Selecting currencies for each borrower
5. 4:45 Calculating net positions after swap
6. 7:05 Arranging swap cash flows
7. 9:33 Summary and key takeaways

About this lesson

This video walks you through a complete worked example, breaking down the five-step process: assessing the potential gain from the swap, splitting that gain between borrowers, identifying which company should borrow in which currency, calculating the net position for each party, and arranging the cash flows to achieve those final rates. Currency swaps are a key technique in financial management, appearing across CIMA and ACCA papers including FM, AFM, and SBL. Understanding how to structure a swap helps you see how companies can access cheaper financing by working together, and how to match assets and liabilities across different currencies to manage economic risk. This is a complex calculation, so working through the example step by step is essential. The logic behind comparative advantage is straightforward, but the mechanics of setting up the swap and calculating the balancing payments take practice. Watch through once, then work through the calculation yourself to build real confidence with this technique.

Duration: 10m